By Sean Geary
A number of debt-focused emerging market exchange traded funds have debuted recently to much fanfare. Last week, WisdomTree debuted its Emerging Markets Corporate Bond Fund (EMCB). This unique, actively-managed fund affords U.S. market participants the opportunity to invest in developing world, dollar-denominated corporate bonds.
Although there are plenty of bond ETFs offering exposure to international debt products, EMCB is the first ETF to concentrate solely on corporate debt from emerging markets. Other internationally-focused corporate bond ETFs, such as the PowerShares International Corporate Bond Portfolio (PICB), deal predominantly in developed world debt.
Other emerging market bond ETFs have focused on sovereign debt, debt issued in local currencies, or have maintained a regional focus. EMCB is the first to offer an all-encompassing, dollar-denominated emerging market corporate debt ETF.
WisdomTree touted the merits of the focus of its new bond vehicle, saying, "Investment-grade, emerging-market corporate bonds have historically offered a significant yield premium compared to similarly rated U.S. corporate securities."
Aside from the benefits of emerging market debt exposure, the EMCB avoids the pitfalls of foreign exchange losses in the issuing currency as the fund invests in dollar-denominated debt.
Investors seeking international bond ETFs with dollar diversification would be better off looking at funds like the WisdomTree Asia Local Debt Fund (ALD), or the iShares Emerging Market Local Currency Bond Fund (LEMB) that hold bonds issued in emerging market currencies.
EMCB moved higher in its second day of trading as investors looking for emerging market corporate bond exposure piled into the fund.